Prudential & Aberdeen stand firm on weak FTSE

(UPDATE) A late charge from bargain hunting investors was eventually beaten down by the bears as the FTSE finished lower after zigzagging its way through another erratic day of trading.

London’s blue chip index, though recovering slightly from a low of 6,416 this morning, ended the day down 0.2% at 6,449 as investors mulled over disappointing earnings updates from companies including chip designer ARM.

Even a bright start for Wall Street, with the S&P 500 up 0.5%, wasn't enough to end a Footsie losing streak in which the index has fallen on 10 out of the past 11 trading days.

London-listed emerging markets-facing stocks took a breather though, with Aberdeen Asset Management rising 5% to 394p and insurer Prudential, which draws nearly half of its revenues from Asia, up 3.3% to £12.44. Both these stocks have in recent weeks succumbed to the selling sparked in part by fears over the health of emerging markets.

The mood was improved by a report showing the UK construction industry had its best month for almost six-and-a-half years in January. The construction PMI rose from 62.1 in December to 64.6 in January.

The pound subsequently bounced before ending the day flat at $1.6299.

Traders were quick to point out that markets will remain volatile for the rest of the week as investors prepare for central bank meetings in the UK and Eurozone, as well as updates on the US labour market.

FTSE extends losing streak after Wall Street rout (09:30)

European shares never had a chance: a 2% decline on Wall Street, followed by a 4% slump on Japan’s Nikkei, set the scene for more losses on Tuesday morning.

The list of reasons, and conjecture, for the consistent declines is long: unsatisfactory company earnings reports, a report yesterday showing US manufacturing fell to a nine-month low in January, high stock valuations, continued worries over emerging markets and the ‘taper’ of Fed stimulus.

The FTSE 100, wallowing down at 6,435 on Tuesday morning, has only managed to close higher on one out of the last 10 trading days. The blue chip index endured a 3.5% decline in January as investors fretted over the state of emerging markets and the US Federal Reserve’s decision to cut its stimulus scheme by $10 billion a month to $65 billion.

With the main European indices down around 7%, traders are wondering whether a ‘10%’ correction is in store, suggested Jonathan Sudaria of Capital Spreads. ‘The bears have a seemingly easy target within reach and the remaining bulls will want to get out of the way so talk of a correction looks to be turning into a self-fulfilling prophecy.’

Of London shares, BP slipped 1.2% to 467p after the oil giant reported adjusted replacement cost net income of $2.8 billion for the last quarter of 2013, down from $3.9 billion in the previous three months.

‘Our initial reaction is that the results were in line and solid,’ said Liberum analysts led by Andrew Whittock. ‘The Downstream performance was poor and the outlook will depend on the margins’

However, keeping his ‘hold’ rating, he added: ‘Capex at the bottom end of the range should be welcomed and BP remains committed to trying to grow sustainable FCF’.

Sainsbury was the biggest riser, up 2.3% to 354p, after analysts at Bernstein raised their opinion on the shares to ‘outperform’.

There are no major economic data reports due today. But this week investors have plenty to keep them occupied. Eurozone and UK central bank policy decisions are due on Thursday. The most closely watched economic data will most likely come in the US labour report on Friday, a key barometer for future Fed policy

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